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The Insolvency and Bankruptcy Code (IBC), 2016, shifted the insolvency resolution paradigm in India from a 'debtor-in-possession' model to a '___-in-control' model.
- Okun's
- health and education
- Veblen
- creditor
Answer: creditor
Prior to the IBC, defaulting promoters retained control of their companies while restructuring debts, often leading to endless delays. The IBC empowers the Committee of Creditors (CoC) to take control of the defaulting entity, allowing them to either approve a resolution plan to revive the company or liquidate its assets within a strict 330-day timeline.
When the RBI wants to inject durable liquidity into the banking system and lower long-term interest rates, it conducts Open Market Operations (OMOs) by ___ government securities.
- purchasing (or buying)
- 40
- lending (or credit)
- tangent
Answer: purchasing (or buying)
When the RBI purchases government bonds from the open market, it pays for them by crediting the reserves of commercial banks. This infusion of permanent cash increases the banks' lendable resources, expands the money supply, and drives down bond yields, thereby lowering long-term borrowing costs for the economy.
The Goods and Services Tax (GST), which subsumed multiple indirect taxes to create a unified national market, is a ___-based tax levied on the supply of goods and services.
- social
- destination (or consumption)
- Paris
- milk
Answer: destination (or consumption)
GST is a destination-based consumption tax, meaning the tax revenue accrues to the state where the goods or services are ultimately consumed, rather than the state where they are manufactured. This shift from an origin-based tax system fundamentally altered the fiscal dynamics between manufacturing-heavy states and consumption-heavy states in India.
The Primary Deficit is calculated by subtracting ___ payments from the total Fiscal Deficit, thereby showing the government's current borrowing requirement exclusive of past debt obligations.
- Solow (or Solow-Swan)
- gig
- short
- interest
Answer: interest
The Fiscal Deficit represents the total borrowing needs of the government. However, a large portion of this borrowing is often just to pay the interest on accumulated past debts. By subtracting interest payments, the Primary Deficit reveals how much the government is borrowing purely to fund its current fiscal year's expenditures.
According to ___ Law, a 1% increase in the unemployment rate will cause a country's GDP to be roughly 2% lower than its potential GDP.
- Population
- FEMA
- short
- Okun's
Answer: Okun's
Arthur Okun's empirical law highlights the severe macroeconomic cost of unemployment. It quantifies the loss in national output resulting from idle labor resources, demonstrating that high unemployment not only causes social distress but also creates a massive negative output gap relative to the economy's full-employment potential.
The economic phenomenon where inflation remains persistently high in specific sectors like food and energy, while remaining stable or falling in other sectors, is referred to as ___.
- 3.5
- long
- Population
- Skewflation
Answer: Skewflation
Skewflation poses a unique challenge for central banks because standard monetary tightening (raising interest rates) might successfully curb general demand but fail to address supply-side bottlenecks in specific sectors like agriculture. This can lead to a situation where raising rates unnecessarily stifles overall economic growth without solving the targeted inflation.
The GDP Deflator is a measure of the level of prices of all new, domestic goods and services in an economy, and it is calculated as the ratio of ___ GDP to Real GDP multiplied by 100.
- Production
- Consumer Price Index (CPI)
- Countercyclical
- Nominal
Answer: Nominal
The GDP Deflator reflects the price changes of all domestically produced goods and services, making it a broader and more comprehensive measure of inflation than the CPI or WPI. By dividing Nominal GDP (calculated at current year prices) by Real GDP (calculated at base year prices), it isolates the exact impact of inflation on economic growth.
Gross National Product (GNP) is calculated by adding ___ to the Gross Domestic Product (GDP) of a country.
- durable (or capital / physical)
- Net Factor Income from Abroad (NFIA)
- multiplier
- product
Answer: Net Factor Income from Abroad (NFIA)
While GDP measures the value of goods and services produced within a country's geographical boundaries regardless of nationality, GNP measures the total value produced by the residents of a country, both domestically and abroad. Therefore, GNP = GDP + (Factor income earned by domestic residents abroad - Factor income earned by foreign residents domestically).
The Index of Industrial Production (IIP) currently uses ___ as its base year for calculating the growth rates of industrial output in India.
- 2011-12
- construction (or real estate / infrastructure)
- multiplier
- notice
Answer: 2011-12
The base year for the IIP was updated from 2004-05 to 2011-12 in May 2017 to align it with the base years of other major macroeconomic indicators like the GDP and WPI. This update also revised the item basket to better reflect the current structure of the Indian manufacturing and industrial sectors.
The National Food Security Act (NFSA), 2013, legally entitles up to ___% of the rural population to receive highly subsidized food grains under the Targeted Public Distribution System (TPDS).
- isoquant
- Refinery Products
- 75
- Tarapore
Answer: 75
The NFSA, 2013, marks a paradigm shift from a welfare approach to a rights-based approach to food security. It mandates coverage of up to 75% of the rural population and 50% of the urban population (averaging about 67% of India's total population), providing them with 5 kg of food grains per person per month at heavily subsidized prices.
The Swaminathan Commission recommended that the Minimum Support Price (MSP) should be at least 50% more than the ___ cost of production to ensure fair remuneration for farmers.
- C2 (or Comprehensive)
- India Debt Resolution Company Ltd (IDRCL)
- 1999
- Countercyclical
Answer: C2 (or Comprehensive)
The C2 cost is the most comprehensive measure of production costs, including imputed rent on owned land and interest on owned capital assets, in addition to actual paid-out costs (A2) and family labor (FL). While the government currently uses the A2+FL formula for MSP, the Swaminathan Commission advocated for the C2+50% formula to ensure true economic viability for farmers.
The Kisan Credit Card (KCC) scheme, which provides farmers with timely access to credit for agricultural needs, was introduced in the year ___.
- government spending (or autonomous expenditure)
- banks
- inflation
- 1998
Answer: 1998
The KCC scheme was launched in 1998 based on the recommendations of the R.V. Gupta Committee. It revolutionized rural credit by providing flexible, low-cost working capital loans to farmers, reducing their dependence on exploitative informal moneylenders and ensuring timely availability of seeds, fertilizers, and pesticides.
The 'Tragedy of the Commons' describes a situation where individuals acting in their own self-interest deplete a shared, ___ resource.
- long
- rivalrous (or unregulated common)
- six
- Pigouvian
Answer: rivalrous (or unregulated common)
Coined by Garrett Hardin, this concept applies to common-pool resources like fisheries or grazing land, which are rivalrous (one's use reduces another's) but non-excludable. Without property rights or regulation, individuals overconsume, leading to the eventual destruction of the resource for everyone.
The Tarapore Committee was constituted by the RBI to lay down a roadmap for fuller ___ account convertibility in India.
- milk
- capital
- government spending (or autonomous expenditure)
- rivalrous (or unregulated common)
Answer: capital
The S.S. Tarapore Committee (1997 and 2006) outlined the prerequisites and timeline for moving towards fuller capital account convertibility (FCAC). It recommended building adequate forex reserves, lowering the fiscal deficit, and reducing inflation before fully opening the capital account to global markets.
When a country's currency depreciates, its exports become ___ expensive for foreign buyers, theoretically improving the trade balance.
- less
- rivalrous (or unregulated common)
- 40
- public
Answer: less
Currency depreciation means it takes fewer units of foreign currency to buy the domestic currency. Consequently, domestic goods become cheaper in international markets, boosting export volumes. However, this relies on the Marshall-Lerner condition, which requires the sum of export and import elasticities to be greater than one.
The International Bank for Reconstruction and Development (IBRD), the original institution of the World Bank Group, primarily lends to ___ countries.
- middle-income (and creditworthy low-income)
- Population
- employment elasticity (or labor market)
- government spending (or autonomous expenditure)
Answer: middle-income (and creditworthy low-income)
The IBRD raises funds on international capital markets by issuing AAA-rated bonds and lends to middle-income and creditworthy poorer countries for specific development projects. The poorest nations, who cannot afford IBRD rates, rely on the concessional loans from the International Development Association (IDA).
The Urjit Patel Committee, constituted by the RBI in 2013, is best known for recommending the adoption of the ___ as the key anchor for monetary policy formulation.
- below
- Outcome
- first
- Consumer Price Index (CPI)
Answer: Consumer Price Index (CPI)
Prior to this, the RBI used the Wholesale Price Index (WPI) to gauge inflation. The Urjit Patel Committee argued that CPI better reflects the actual cost of living for consumers and recommended shifting the monetary policy focus entirely to CPI, leading to the formalization of the inflation-targeting framework.
The Lead Bank Scheme was introduced in 1969 based on the recommendations of the ___ Study Group to coordinate credit deployment in rural districts.
- product
- long
- Gadgil
- public
Answer: Gadgil
The Gadgil Study Group, along with the Nariman Committee, recommended the Lead Bank Scheme. Under this, a specific bank (usually with a large branch network) is assigned the role of a consortium leader for each district to coordinate the efforts of all credit institutions and identify local investment potential.
Under the Priority Sector Lending (PSL) guidelines, domestic commercial banks are required to lend ___% of their Adjusted Net Bank Credit (ANBC) to specified priority sectors.
- trust (or confidence / faith)
- two
- 40
- 75
Answer: 40
The 40% target ensures that credit flows to vital but often neglected sectors like agriculture, micro, small and medium enterprises (MSMEs), education, and housing. It is a key instrument for promoting financial inclusion and balanced regional development in India.
When commercial banks face severe liquidity shortages and cannot borrow from the inter-bank market, they approach the RBI as the ___.
- lender of last resort
- Washington
- substitutes
- arbitrage (or resale)
Answer: lender of last resort
This critical function ensures the stability of the financial system. By providing emergency liquidity assistance to solvent but illiquid banks, the RBI prevents bank runs and systemic contagion that could otherwise trigger a broader financial crisis.